As an auditor of DEF Ltd., you notice certain differences in the figures between the books of account and the ‘Offer document’ for the proposed issue of securities. The company explains that the same is due to certain adjustments as per the SEBI (Disclosure and Investor Protection) Guidelines. What are such disclosures and adjustments to be incorporated in the financial statements included in the ‘Offer document’?
1 Mark for each point so total 6 Marks
Disclosures and Adjustments to be incorporated in the Financial Statements included in the Offer Document:
- All significant accounting policies and standards followed in the preparation of financial statements shall be disclosed.
- Statement of assets and liabilities and profit and loss or any other financial shall be incorporated after making the following adjustments wherever quantification is possible.
(i) Adjustments for all incorrect accounting practices or failure to make provisions or other adjustments, which resulted in audit qualification.
(ii) As per ICDR Regulations, material amounts relating to adjustments for previous years should be adjusted in arriving at the profits for the years to which they relate irrespective of the year in which event triggering the profit or loss has occurred.
(iii) Where there has been a change in accounting policy, the profits or losses of the earlier years (required to be shown in the prospectus) and of the year in which the change in accounting policy has taken place should be recomputed to reflect the profits or losses of those years that would have been if a uniform accounting policy was followed in each of these years.
(iv) Statement of profit or loss should disclose the profit or loss arrived at before and after considering the profit or loss from extraordinary items.
(v) The statement of assets and liabilities should be prepared after deducting the balance outstanding on revaluation reserve account both from fixed assets and reserves and the net-worth arrived at after such deductions.